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Beware the “on-sale bar”

Victim of the on-sale bar

A patent is invalid if the invention was sold more than a year before filing (on-sale bar), and the recent “Helsinn v Teva” case shows that the courts can be harsh.

A patent applicant can accidentally ruin their own patent in various ways. In the US, one error is to first sell an invention (presumably in the form of a product), and then wait more than a year to file the patent. This error violates the 35 USC 102 on-sale bar of classic (pre-2012) patent law. This error also violates the latest 2012 AIA version of patent law, which phrases this as “on sale, or otherwise available to the public”.

However, the relationship between an “invention” and a “product” isn’t always clear, and it also isn’t always clear if a “sale” has taken place. If I privately show you a cardboard box and say “I have an invention inside, want to buy it sometime if it works?”, and you say “Maybe”, is this a sale that invalidates a later patent? In the event of doubt, how will the courts rule? Will they err on the side of protecting the patent, or invalidating the patent?

In their May 1, 2017 “Helsinn Healthcare via Teva Pharmaceuticals” decision, the Federal Circuit took a harsh and patent unfriendly approach. Indeed, this ruling was so harsh that Lamar Smith, the Congressional sponsor of the 2012 AIA law, stated that the court was ignoring the intent of Congress.

To greatly simplify the Helsinn case: back in 2001, Helsinn was doing FDA clinical trials on the efficacy of various palonosetron drug formulations to reduce nausea during chemotherapy. During these trials, they signed a supply agreement with MGI (another company) stating that if the FDA approved some of Helsinn’s various drug formulations, and if MGI subsequently made purchase orders for these drug formulations, and if Helsinn subsequently accepted these purchase orders, then Helsinn would sell the drug to MGI. In 2003, after the clinical trials were successful, but before FDA approval, and before any actual product changed hands, Helsinn began filing for various patents.

Teva, a competitor, decided to challenge these patents as being invalid due to the “on-sale bar”. But was there really a sale? Was there an invention yet? Was it disclosed to the public? A lower court ruled in favor of Helsinn, but the Federal Circuit reversed.

The Federal Circuit used the Uniform Commercial Code (UCC – a set of laws intended to “save” ambiguous contracts by automatically supplying missing terms) to argue that there was a “sale” despite all the “ifs” and ambiguity. They then argued that the invention was in the (undelivered) product and that the invention existed before clinical proof that it actually worked. Strangely, they even argued that the AIA “on sale, or otherwise available to the public” language didn’t apply because… this would change past practice. Apparently Congress, (despite good reasons and clear intent) somehow doesn’t have enough authority to make these changes?